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EBRD - Water Project Identification, Financing Approach and Donor Coordination in Central and Eastern Europe
European Bankfor Reconstruction and Development
Gerry MuscatSenior Banker, Municipal and Environmental Infrastructure
Międzyzdroje, 21-24 April 2002
Cumulative commitments
€ 20.2 billion
0
5
10
15
20
1995 1996 1997 1998 1999 2000 2001
€ bn
Unaudited December 2001
Introduction to EBRDIntroduction to EBRD
International financial institution founded in 1991, owned by 62 national and supranational shareholders, including EU and CEE countries
Promotes market-based economies in 27 countries in Central & Eastern Europe and the former Soviet Union
Provides finance to public and private sectors
Key facts about EBRD
EBRD differs from commercial banksEBRD differs from commercial banks
Mandate to foster transition from planned to market economies
The EBRD promotes environmentally sound and sustainable development in all its activities
We help facilitate EU grant co-financing and mobilise Technical Cooperation funds to assist municipalities in implementation of projects
Can finance suitable projects without bank guarantees or sovereign guarantees
Willingness to try new products/structures
Broad market knowledge
Regional and sectoral breakdownRegional and sectoral breakdown
Municipal Sectors Regions
Water& Sewage
64%
Solid Waste
7%
District Heating
22%
Municipal Services
4%
Urban Transport
3%Southeast
Europe36%
Central Europe
47%
Russia and central
Asia15%
Regional2%
Water supply and wastewater treatmentWater supply and wastewater treatment
Meeting EU water and wastewater standards
Need to increase investments in maintenance and asset renewal
Improve water supply standards
Improve collection and treatment of sewage
Improve operational and financial performance of municipal water and sewerage companies
EBRD has invested in 19 water and sewerage projects
Investment challenges
Selected water supply and wastewater Selected water supply and wastewater treatment projectstreatment projects
Sofia Water Concession
Bulgaria€31 million syndicated
loan
December 2000Bulgaria's first water
privatisation
Sofia Water Concession
Bulgaria€31 million syndicated
loan
December 2000Bulgaria's first water
privatisation
Budapest Wastewater Services
Hungary€13.1 million
loan
December 1998Partial privatisation of waste- water services
companies
Budapest Wastewater Services
Hungary€13.1 million
loan
December 1998Partial privatisation of waste- water services
companies
Brno Waste Water Treatment Plant
Czech Republic€47.5 million syndicated
loan
December 1999 Upgrading & Extension of
existing wastewater treatment plant
Brno Waste Water Treatment Plant
Czech Republic€47.5 million syndicated
loan
December 1999 Upgrading & Extension of
existing wastewater treatment plant
St Petersburg Water & Environment
Russian Federation€17.8 million
loan
August 1997Improvement of water and
wastewater services in St. Petersburg
St Petersburg Water & Environment
Russian Federation€17.8 million
loan
August 1997Improvement of water and
wastewater services in St. Petersburg
Zagreb Waste Water Treatment Plant
Croatia€55.2 million
loan
December 2001BOT financing of first
wastewater treatment plant
Zagreb Waste Water Treatment Plant
Croatia€55.2 million
loan
December 2001BOT financing of first
wastewater treatment plant
Riga Water Company Corporate Loan
Latvia€38.2 million
loan
November 2000Re-finance existing loan and make additional investment
in Riga Water
Riga Water Company Corporate Loan
Latvia€38.2 million
loan
November 2000Re-finance existing loan and make additional investment
in Riga Water
Maribor Waste Water Concession
Slovenia€14.8 million
loan
April 1999Construction and operation
of wastewater treatment plant
Maribor Waste Water Concession
Slovenia€14.8 million
loan
April 1999Construction and operation
of wastewater treatment plant
Tallinn Water Limited Privatisation
Estonia€31 million
loan
October 2001Privatisation of Tallinn
Water Ltd.
Tallinn Water Limited Privatisation
Estonia€31 million
loan
October 2001Privatisation of Tallinn
Water Ltd.
EBRD helps attract commercial co-financingEBRD helps attract commercial co-financing
Commercial banks frequently co-finance EBRD projects under A/B and other loan structures
EBRD involvement enhances municipal risk profile
Syndication raises municipality’s international profile
EBRD has syndicated 4 municipal projects
EBRD investment selection criteriaEBRD investment selection criteria
Financial, economic and technical viability
Priority projects (environmental, national, local)
Credit quality borrower
– strong economic base (municipality)
– financial strength/creditworthiness
– institutional capability and potential
Readiness to implement changes
– cost recovery/tariff increases as appropriate
– financial and operational performance improvement
– creditworthiness enhancement
Environmental PrioritiesEnvironmental Priorities
National environmental strategies
Local/regional environmental priorities
ISPA environment strategy
EC Directive-Relevance
Link to international priority (eg. Baltic Sea Programme, Black Sea Programme, Odra 2006, Danube Environment Programme)
Donor CoordinationDonor Coordination
International forums: PPC,Northern Dimension, Helcom
Close links with bilateral donors
Via national authorities and EBRD Resident Offices
Through EBRD shareholders
Close coordination with EU PHARE/TACIS/ISPA
EBRD helps mobilise ISPA co-financingEBRD helps mobilise ISPA co-financing
Memorandum of Understanding between EBRD and ISPA signed in April 2000
EBRD project appraisal consistent with ISPA evaluation process
Co-operation in organising technical assistance
Assistance to municipalities in preparation of applications to ISPA for co-financed projects
Agreement on procurement requirements
Approximately €400 million in EBRD-ISPA co-financing
Total project value of almost €1.3 billion
Over €650 million of projects in pipeline
Projects in Czech Republic, Estonia, Lithuania, Poland, Romania, etc.
Co-operation with ISPA EBRD-ISPA Track Record
Over €460 million EU co-financed projectsOver €460 million EU co-financed projects
Country Project Name Type of Co-financing
Amount EUR million
EBRD Finance
Total Project Value
CZECH REPUBLIC Brno Waste Water Treatment Plant Upgrading Phare 14.2 47.5 82.8ESTONIA Small Municipalities Environment Project Phare 11.6 10.2 46.0
Riga Water Company Corporate Loan ISPA 17.0 38.1 148.4LITHUANIA Kaunas Water and Environment Phare 4.0 17.0 99.4
Kaunas Water and Environment Project - Phase II ISPA 20.1 14.7 45.2POLAND Krakow Plaszow II Project ISPA 55.3 21.7 81.0
Bydgoszcz Water Supply ISPA 39.5 29.7 80.8Rybnik Sewerage Development Programme ISPA 71.0 16.7 87.7Wroclaw Multi-Sector Municipal Infrastructure Project ISPA 49.6 30.2 90.3
ROMANIA Municipal Utilit ies Development Programme - Phase II Phare 35.4 85.4 213.8Regional Water and Environment Programme Phare 15.0 18.2 50.6MELF: Subproject Arad ISPA 13.5 4.5 46.0MELF: Subproject Constanta ISPA 71.6 20.0 100.4MELF: Subproject Iasi ISPA 38.5 13.2 55.0
SLOVENIA Maribor Waste Water Concession LSIF 6.6 28.1 43.5Totals 463.0 395.2 1270.9
Structure Funds will soon become availableStructure Funds will soon become available
Structure Funds are already committed for 2004-2006
Funds will be larger than ISPA
Implementation may be difficult
EBRD can help public authorities prepare
prepare large projects to be ready for Structure Fund co-financing after accession
prepare and finance pilot projects for role-out after accession
work with regions to develop programmes suitable for regional development funds
(Only relevant for EU Accession countries)(Only relevant for EU Accession countries)
EBRD can help:Structure Funds 2004-2006
EBRD offers several financing structuresEBRD offers several financing structures
Loans to utilities Loans to utilities
Municipal lending Municipal lending
LeasingLeasing
Partial guaranteesPartial guarantees
Limited or non-recourse project financing to public or privately-owned concession companies
Non-sovereign public lending to municipalities
EBRD will structure each product according to project needs
Various forms of leveraged leasing structures for creditworthy entities
Partial risk and credit guarantees
Revenue and project bondsRevenue and project bonds Revenue bonds backed by cashflows
Financing structures: municipal loanFinancing structures: municipal loan
€30.3 million multi-sector loan for water supply, waste management and sewerage projects
Direct loan to municipality
Sub-loan to water company - expectation of repayment from water and sewer charges
ISPA co-financing for all projects
EBRD procurement policies applied
Loan to a municipality: Wroclaw, Poland
Government
Utility
ISPA Grant
Sub-Loan Agreement
EU - ISPA EBRD
EBRD loan agreement- tariff increases- corporate governance- security
Financing Agreement
City ofWroclaw
Financing structures: loan to municipal utilityFinancing structures: loan to municipal utility
Limited payment undertaking
City of St Petersburg
User charges
Consumers
Federal Government
EBRD
Vodokanal St Petersburg
Loan to a municipal utility: St. Petersburg Water, Russia
Guarantee Agreement- loan repayment- tariff increases- project support- corporate governance- payment water bills
EBRD loan agreement- financial ratios- operational performance- tariffs
Financing structures: project company loanFinancing structures: project company loan
First privately owned concession for water and wastewater utility in Bulgaria
It will significantly improve environmental standards in water and wastewater systems allowing Sofia to eventually comply with EU standards
Selected “Eastern European Project of the Year 2000” by Privatisation International
The project will provide at least US$150 million in investment in water and wastewater services over the next 15 years
Loan to a private concessionaire: Sofijska Vode, Bulgaria
equity
Direct Agreement (step-in rights)
Technical Services Agreement Concession agreement
EBRD
Municipalityof Sofia
SofijskaVoda
SponsorConsortium
Banks EBRD loan agreement
EBRD (guarantor)
Special Purpose Vehicle
Municipality/Municipal Utility
Service fee or payment guarantee
Counter guarantee
Concession typecontract
Loan agreement
Commercial banks
Guarantee of Local Government performance obligations
Financing structures: guaranteesFinancing structures: guarantees